New hotels are on the rise, but occupany isn’t. Oversupply of rooms, and consequent sluggish room rents are forcing hotels to fetch more MICE
THERE ARE OVER 13,000 branded hotel rooms within a 60-square-kilometer radius of the National Capital Region. A figure that puts all other Indian cities to shame. Except, not really. The average occupancy of these hotels is not over 55-60 per cent. This indicates a perpetual crisis in the hotel industry in the nation’s capital. The situation is virtually similar across other metros too.
In fact, Delhi will have more hotel rooms very soon. The Delhi Aerocity, a 43-acre hotel district set up by Delhi International Airport (DIAL), which was envisaged to offer over 5,000 rooms and was hailed as the future central business district of the capital, has opened up half of the promised numbers for business. More are coming — some hotels plans are on hold, and some are close to finishing. But experts feel that business in Aerocity will be different.
What Figures Tell
According to a report by rating agency ICRA, the hospitality industry in India grew 7.6 per cent (against a projection of 8 per cent) during the October-December 2015 quarter. A decent rise, however, “after 20 consecutive months of year-on-year occupancy increase, lack of traction in average room rate (ARR) is a worrying feature now,” the report said. The reason behind sluggish ARRs is oversupply as shows studies by ICICI Home Finance. In its outlook for the Hyderabad market, it recently observed that due to doubling of inventory in the organised segment to over 5,000 rooms in the past five years, the ARR and occupancy have both declined sharply in Hyderabad.
Reports from UK-based data and analytics specialist STR tell the same story. According to it while the occupancy improved by 2-6 per cent across metros, the average room rates declined in Bangalore (by 1 per cent), Delhi-NCR (4 per cent), Noida/Greater Noida (5.4 per cent), and Chennai (2.3 per cent) in 2015.
This story is from the August 8, 2016 edition of Businessworld.
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This story is from the August 8, 2016 edition of Businessworld.
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